Given my position was not exactly where I wanted it to be - SPY was 139.75 instead of 140.75, I decided to roll out my options on Thursday instead of Friday. Also, I have a busy morning on Friday in the city so I may not have gotten the chance to execute my trades. I checked the option liquidity and it seemed high. One of the legs - 137 had really high bid ask spreads of around 3%. Others looked liquid at 0.5% bid ask spreads. (Reminder to self - establish measures of spread liquidity). Anyways, I rolled my positions and also tried a new set of positions, which arguably should not increase the risk but keep transaction costs down (Reminder to self - need detailed analysis of that). This position is equivalent to over/under weighting the options so that the risk reward ratio can be achieved with smaller number of transactions.
Also, I increased my options open positions from around 10 each to around 25 each. While this is little difference on money in the market (which is still around $3,500), it does waste money in bid ask spreads and later on in transaction costs as well. Imaging buying 1 share at $1,000 instead of 1,000 shares at $1. Not that extreme, but still. So I did three different things this time: (a) traded on Thu, (b) traded in high bid ask spread situations, (c) increased option position exposure.
The bid ask spreads killed me - around $100 lost in there. I am hoping the gain in the strategy offsets that, otherwise I will have a loosing week this week. As of this writing, things seem to have changed (Reminder- analyse why?). I am only down $30 after executing all those inefficient transactions. Not bad!
One thing I noticed is that when you have 25/30 options out there, each tick movement in the price is worth 0.01*100*25 = $25 and thus positions can wildly fluctuate even on small movements. My hope is that the movements are in my favor!
Second thing I noticed: It takes around 1 hour to execute trades. Thus, 1 hour per week, unless I come up with some smart trade execution strategies (Reminder to self: do that!)
Also, I increased my options open positions from around 10 each to around 25 each. While this is little difference on money in the market (which is still around $3,500), it does waste money in bid ask spreads and later on in transaction costs as well. Imaging buying 1 share at $1,000 instead of 1,000 shares at $1. Not that extreme, but still. So I did three different things this time: (a) traded on Thu, (b) traded in high bid ask spread situations, (c) increased option position exposure.
The bid ask spreads killed me - around $100 lost in there. I am hoping the gain in the strategy offsets that, otherwise I will have a loosing week this week. As of this writing, things seem to have changed (Reminder- analyse why?). I am only down $30 after executing all those inefficient transactions. Not bad!
One thing I noticed is that when you have 25/30 options out there, each tick movement in the price is worth 0.01*100*25 = $25 and thus positions can wildly fluctuate even on small movements. My hope is that the movements are in my favor!
Second thing I noticed: It takes around 1 hour to execute trades. Thus, 1 hour per week, unless I come up with some smart trade execution strategies (Reminder to self: do that!)
No comments:
Post a Comment